Many car dealers understand the importance of service departments, but are they aware of the new opportunities in today’s fixed operations business? In this CBT News Power Lunch, host Jim Fitzpatrick is joined by Jade Terreberry, senior director of business development at Cox Automotive, and Juan Flores, senior director of product management at Kelley Blue Book, to discuss how new consumer habits have opened doors to greater revenue and higher demand.

In the last few years, car owners have changed under the weight of inflation and rising interest rates. The length of time buyers keep their used vehicles, for instance, has been growing steadily. “This ties into an opportunity for dealers to take advantage of these…ownership trends to ensure that they’re prepared for service lane opportunities…” Flores remarks. Since consumers are waiting longer to replace their vehicles, fixed operations departments stand to be a significant source of revenue for dealers in the coming months. This means they should prepare to refine and expand their service offerings. “Re-emphasizing that the dealership is competitively priced and differentiating themselves [through] quality work; that would be the way to win people back and hold onto the customers they have now,” states Flores. 

Dealers should also be sure to track key performance indicators to make sure their fixed operations plans are working. “I think more than ever the importance of focusing on revenue streams, understanding the revenue streams that our [dealers] want to have; it really comes down to retaining customers, retaining your staff, having the right tools and technology to be able to measure what’s working and what’s not,” adds Terreberry.

While these measures will help bring customers in, dealers must also remember that today’s service clients have different needs than they did before the pandemic, she continues. For many years, buyers have prioritized the ability to research their dealer and vehicle before making a purchase. Now, they expect the same levels of transparency and convenience on the fixed operations side as they receive on the variable operations side. “They’re wanting to do research, so give them a place to do that service research,” Terreberry explains.

Hoping to make research easier for their customers, dealers may think they should rely on the latest technology in their fixed operations campaigns. However, this new customer habit does not mean that every new solution or tool will work for every storefront. Many retailers are looking to integrate customer data platforms (CDPs), powerful data collection and analysis tools that can connect businesses with consumers and operate alongside other digital retail software. However, Terreberry cautions against using a CDP without performing a thorough cost-benefit analysis. These platforms can quickly become expensive, and while they can help dealers expand into new markets, they are no substitute for first-party data. For many storeowners, she explains, their marketing dollars may be better spent on their service departments since they serve as an essential method for establishing customer identities. “When you think about the ability to get that first-party consumer data, fixed ops is the way to do it,” remarks Terreberry. “There are people in your own backyard that are researching service, pricing, transparency, maintenance, recall…that is just a big opportunity in a big place…”

Flores agrees, encouraging dealers to embrace a multifaceted approach to take the opportunities present in today’s car market. Should they allocate more money to their fixed operations business, he notes, dealers must be sure to emphasize transparency, work quality, pricing and efficiency simultaneously, both online and in-store. “We all know that digital shoppers are now 43% of the market, so when you’re engaging with them in that similar fashion by providing those types of tools…what you’re doing is you’re doubling down on the fact that this dealership is there for the long haul to partner with that customer.”

To maximize their fixed operations earnings, both Terreberry and Flores underline how important it is for dealers to plan ahead. By thinking long-term, understanding their key performance indicators and carefully studying changes in the car market, storeowners can keep customers coming to their business regardless of how the car buying journey changes.

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Forward-thinking dealers have drastically improved fixed operation profits over the last year, but what factors are driving these results? In this CBT News Power Lunch, host Jim Fitzpatrick is joined by Skyler Chadwick, Director of Product Consulting at Cox Automotive, to discuss the major components of service department growth.

Opportunities in fixed ops

While there is always room to grow in the fixed ops space, Chadwick expects the number of opportunities to expand rapidly as inventory returns to pre-pandemic levels. However, taking advantage of these new openings will require dealers to carefully consider the future. According to Cox Automotive’s Forward Thinking Dealership Study, retailers who fell behind on service proficiency saw their earnings significantly reduced. Meanwhile, Chadwick explains that dealers “who were forward thinking and implementing these advanced tactics were both more profitable and more efficient…” In fact, these businesses saw fixed ops income increase 28% over the last 12 months alone.

Qualities of forward-thinking

Such “forward-thinking” dealers tend to display four qualities in their fixed ops departments: transparency, optimization, integration and personalization. Features such as accurate payment calculators, mobile appointment scheduling, online payment options and video chat not only enhance the customer’s experience but make the entire process faster. “Customers have told us for years they want control over their service experience, and they want to be able to interact with their service provider…on their own terms,” comments Chadwick. “Most successful dealerships are seeing the value in giving these customers control.”

The technician experience

However, consumers are not the only group dealers should prioritize. Technicians are an equally important contributor to a fixed ops department’s success, and these employees benefit just as much from the four qualities mentioned above. “Our research showed that forward-thinking dealerships are looking for ways to streamline their service capacity management,” Chadwick explains. Electronic dispatch programs which automatically assign work to maintenance staff and marketing alerts which notify customers of open time slots are perfect examples of techniques that make the advisor’s work less complex and more efficient.

Most important quality

Out of all these qualities, the most valuable is personalization. This element is less concerned with amenities, clarifies Chadwick, and more with responding to the needs of the consumer. Other industries have already made the shopping process more personable by listening to buyer feedback: now vehicle owners have come to expect the same quality of care from their fixed ops experience. Retailers need to “go back to giving control and demonstrating this respect to their time,” Chadwick remarks, without forgetting “that our staffs are consumers too.”

Learn how to apply these proven principles to increase service profits. Download the new Xtime eBook.

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Recall and warranty work are areas of opportunity for dealerships, but ultimately it’s up to the dealer to incentivize consumers to bring their vehicles in the door. In this CBT News Power Lunch, we’re tackling recall work with Juan Flores, Senior Director of Product Management at Kelley Blue Book, (KBB). Juan is responsible for furthering design and implementation of the Service Advisor product, Dealer Ratings, and Autotrader Private Seller.

In the studio we have Mike Boyd, Senior Director of Commercial Strategy for acquisition, reconditioning, and merchandising for vAuto. Mike is also the Founder of vAuto’s iRecon. A 25-year veteran of the automotive industry, Mike’s passion lies in helping dealers improve operational performance driving greater dealership ROI.

Recall work and Loyalty

The main reason why individuals don’t go to a dealership for their vehicle recall work, according to Flores, is that “OEMs and dealers alike have lost touch with the vehicle owner.” However, the KBB brand has significantly exceeded other connections with its system for recall checking. In fact, around 500,000 customers used KBB’s recall checking systems just last month. Recall work connects to customer work and both can assist dealers and their service drives in terms of building a pipeline to increase revenue opportunities and retention. 

When it comes to developing a pipeline in the service department, clients are more inclined than ever to cross shop or switch to a different brand. In order to better serve customers and draw them in for something of value, Boyd says, “we have to develop better ways to service them.” About 25% of the 500,000 recalls involve safety issues. Boyd adds, “Imagine being able to reach out to those customers as a way to re-engage, or engage for the first time, and bring them in…it opens multiple avenues for additional touch points and revenue.” 

On the other hand, 47% of clients who visit a dealership as a result of the KBB recall notification are more inclined to make the repair than to trade in their car. Boyd notes, “When customers walk in and you offer them value, present them with a good, and you’re providing them options, It’s a win-win.” 

Yet according to Flores, “the innovative dealers are leveraging loyalty opportunities and bundling the customers’ experience” when it comes to transparent pricing. Since customers want straightforward pricing, by providing them, it enables dealers to stand out from the competition in the service area and on the back end.

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Dealers are looking for new ways to increase sales at the store level and in the service department. Juan Flores, Senior Director of Product Development at Kelly Blue Book (KBB), discusses what dealers need to focus on moving forward in today’s Power Lunch fueled by Cox Automotive.

The change in consumer demand from the used-car market to the new market has led to the macroeconomic patterns that dealers see and are the subject of discussion. According to Flores, “rising interest rates have led to higher monthly payments, which have made buyers more reluctant to buy a new car.” 

Dealers used to make a lot of money selling used cars, but as consumer preferences changed, they had to concentrate on their service department. Especially given that many buyers keep their vehicles longer than average (eleven years instead of eight).

It’s vital to emphasize that seven out of ten vehicle owners leave dealerships after year five,” Flores says. They are departing because of the lack of pricing transparency, which strengthened the trade-in process. However, according to Flores, price transparency is evolving throughout the entire business, including the service lane. Therefore, “dealer principles need to focus on driving service in the service lane, or they will continue to see consumer leakage.”

To prevent the two primary pain points of customer leakage, Flores says: 

1. Dealers need to focus on the lack of price transparency, as mentioned before. For example, “It’s not until the service manager slides the estimated in-voice across the desk that creates consumer anxiousness.” 

2. Vehicle owners dislike that they can’t confidently obtain current recall information for their vehicles. For instance, with the recent recalls made earlier this week, KBB has searched the provided 17-digit VIN for sufficient recall data.

Conversely, forward-thinking dealers across the nation can seize chances to grow their service departments. When a service and price walk combined are utilized, it highlights the service department. For example, finding a worker to explain costs and expectations to customers and provide overall satisfaction is an intelligent move for dealers to prevent future leaks. 

Because 7 out of 10 owners defect, Flores sees customer loyalty as temporary. But, he also believes that “if these issues get addressed in every dealers’ service department, it will create segmented loyalty.” He adds, “service centers will become, if they haven’t already, a genuine focus of dealer efforts and a significant part of the bottom line.”

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On today’s Power Lunch, we’ll spend some time discussing efficiencies within the dealership service department. Joining us in the studio are Jade Terreberry, Senior Director of Business Development at Cox Automotive, and Mike Boyd, Founder of vAuto’s iRecon.

Disruption is the catalyst for change and the driver of opportunity in the car business, says Terreberry. However, disruption also changes the entire dynamic of the market. As pent-up demand continues to unleash, car dealers have the potential to earn big dollars. So it is crucial to gain market share and find efficiencies that drive improvement. To help their dealer partners gain more market share, Kelley Blue Book is thinking through opportunities for dealers to understand how to use their dollars better, especially in the dealership service department.

In the current market climate, the amount of reconditioning done on pre-owned vehicles has declined, which makes sense when customers are abundant, and inventory is short, adds Boyd. Price is no longer driving activity; access is. Boyd believes this will affect brand loyalty and the dealership’s brand. Consumers who buy cars from your dealership have to get service from somewhere. Are they going to come back and shop from you?

Over 70% of consumers say that they are taking most of their steps to purchase or service online, explains Terreberry. Car buyers don’t intend to return to the way it was before, but trust is the number one factor. Consumers are demanding transparency on all fronts now. They want to ensure they are paying a fair price and that market share is up for grabs for anybody willing to meet consumers where they want to be. Offer the experience via channels where customers search to make that all-important connection.

To acquire new service customers and their lifetime value, Boyd says car dealers must understand what clients want. When you sell a car to a customer, explain what your dealership has to offer overall. Take the extra step and introduce them to the dealership service department. Try to be as clear and transparent as possible, so customers know what to expect when they return.

There’s a war on talent across the board. Retention of your key people is vital. The market requires car dealers to get inventive. Service customers will not wait to go on Summer vacation because your service department is backed up. They will find an available service drive, and if the experience is exceptional, they will be loyal customers. Car dealers have to keep those customers attached to the store, and it doesn’t necessarily mean spending more dollars. You don’t have to pay more than 5-10% of your marketing budget on the service department and fixed operations. However, you have to spend it in the right places, says Terreberry.

Boyd adds that qualified auto technicians are attracted to higher salaries and better benefits. It’s not necessarily about pushing employees harder. It’s about working with them to understand how they can perform at a higher level. It comes down to the total compensation package, quality of life, and leveraging technology to increase efficiency.

Terreberry further recommends that car dealers get back to the basics and put on their running shoes. Be aware and understand market share opportunities. There are too many macroeconomic forces at play to sit back and wait to see what happens.

Did you enjoy Power Lunch with Jade Terreberry and Mike Boyd? Please share your thoughts, comments, or questions regarding this topic by submitting a letter to the editor here, or connect with us at newsroom@cbtnews.com.

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Did you know that $214 billion in revenue is available to capture by dealership service providers? Service departments that are looking to dial up more efficiency to drive profits out of that $214 billion pie are adding new tools and technologies that promote time savings, smoother processes, dealership customer retention, and help grow market share. Today on Inside Automotive, Cox Automotive solution Xtime’s Skyler Chadwick, Director of Sales Engineers, has outlined five tech trends that will increase productivity and make for a more profitable service department. 

According to the latest Cox Automotive Service Industry Study, the average number of customer visits to the service department per year has declined from 2.8 visits in 2018 to 2.3 visits in 2021. This drop in visits underscores the importance of car dealers maximizing every customer’s experience in the service department, says Chadwick. Technology is aiding car dealers in this area, and there are five notable trends to consider:

1. Streamlining and automation
2. Enhancing digital capabilities
3. Pick-up and delivery service
4. Multimedia driven communication
5. Connected technologies

The overall goal, says Chadwick, is to efficiently get more vehicles through the service lane and create exceptional customer experiences. Marketing services must get involved as well. Digital communications and marketing synchronicity can translate to an average $110 increase per repair order. Having other capabilities like ridesharing solutions or pick-up and delivery can also give you a competitive advantage. In fact, 89% of consumers are willing to choose one dealer over another because of those features. 

Speaking more generally about the service department, car dealers have been challenged for years with finding technicians and service advisors. Chadwick says that these career paths are great options for the younger generations joining the workforce. He adds that the industry will see a big transition from ICE vehicles to electric vehicles. However, dealerships will still need skilled service employees to oversee the customer journey. 

In his opinion, today’s auto technicians will not lose their jobs due to the rise of EVs. Chadwick explains that the mechanic stereotype will change. The modern technician is equipped with technology and skills for the future, but car dealers need to start actively acknowledging the lack of technicians as a whole. 

Over the next three to five years, Chadwick says that fixed ops directors and service department leaders need to get ahead and create teams within the dealership that are dedicated to EVs. COVID-19 has also made consumers reliant on technology more than ever before, and robust communication processes are vital. Without a consistent approach in place, consumers end up frustrated.

Spring and Summer holiday travel is fast approaching as well, and car owners are readying their vehicles for long trips. New tech tools help keep satisfaction and profits high during those peak demand times. Even though overall service department visits are down, the average revenue per repair order has increased over the last eight months. Travel season is a colossal opportunity for the service department, says Chadwick. It’s time for car dealers to invest in technology and create a better experience for their consumer base.

To learn more about how Xtime is helping car dealers maximize service department operations, request a demo today.

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The 2021 Cox Automotive Service Industry Study revealed positive news for dealership service centers, but is money still being left on the table? On today’s Power Lunch we’re pleased to welcome Tracy Fred, Vice President of Operations for Xtime, to take us through their latest study and what you can do to improve your consumer experience today.

The study included more than 2500 consumers in the U.S. from ages 18 to 75 that have had at least one service visit in the past 12 months. The study revealed, despite challenging market conditions, dealership service centers remained resilient with a market share up 1% from 2018 to 34% in 2021. Fred says there’s still another 66% of the service market up for grabs, translating to $214 billion in potential revenue.

While consumers prefer dealerships, the top barriers for returning to the dealership are cost and location. When consumers do visit the dealership service department, nearly 1 in 4 says, their dealership visit takes longer than expected. Dealerships’ top frustrations were parts delays from manufacturers and hiring technicians. Fifty-seven percent of dealerships say their service department is not fully staffed. Eighty percent of dealerships say they expect the labor shortage to continue. Fred says, while there is a shortage, there is a focus on investing in this particular area of the business.

Nearly, all top-performing dealers agreed that improving the consumer experience is an important focus, moving forward. Fred says they found that service departments that offered digital tools to their consumers, generally have a positive outlook. Nine in ten vehicle owners who scheduled a service appointment online were highly satisfied. She says dealerships need to make sure they promote these tools and the conveniences they enable for consumers at every opportunity.

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Proactive Dealer Solutions emerged as one of the industry’s leading BDC solutions providers and has pioneered innovative BDC concepts, which have evolved into better customer experiences for the entire dealership. Today, Proactive Dealer Solutions has developed some robust technology solutions to enhance the customer experience and dealership profitability.  

Last quarter, Proactive Dealer Solutions launched Brooke.ai, the very first digital voice assistant built specifically for automotive. Brooke.ai has the human-parody capability of answering, handling, and appointing inbound service calls and other common conversations. On today’s Power Lunch, we’re pleased to welcome Lawson Owen, and Jason Beckett, Chief Executive Officer and Chief Operating Officer of Proactive Dealer Solutions, respectively.  

Beckett starts by describing the big increase in purchasing and transactions through digital voice assistants. In 2020, the number totaled about $2 billion, with projections to increase to $164 billion in 2025. Transactions are the highest form of trust and Becket adds that they’re great indicators of consumers’ willingness to use this type of technology.

Digital voice assistance in the dealership is also necessary for the service drive, says Beckett. Fixed operations are already process-driven and are additionally, the largest lead source. 20-30% of calls coming into a service drive are lost or go unanswered. He says that even during the pandemic, the fail rate has been high. 68% of calls that aren’t answered go somewhere else. Owen adds that if dealerships just answer the phone and interact with the consumer, ROIs will go through the roof.

Beckett wants dealers to understand that it’s not about creating new leads but handling the leads you already have, and enhancing the customer experience. 75% of calls coming into a service drive are non-technical. Brooke.ai is not intended to eliminate staff. Rather, the goal is to improve inefficiencies, and bring consistency to customer interactions. Owen says it will allow the staff to focus on other things more important, like retention calls. He adds that the most important thing is to generate positivity from the customer during the transaction.

Brooke.ai is the first digital voice assistant that answers, handles, and appoints inbound service calls. This software is the best service scheduling coordinator at scale. Brooke.ai has the ability to understand and handle the unknown.

The most important KPI Beckett says they track, is a live agent request. It’s an indicator for dealers to know how willing consumers are to work with Brooke.ai. They have a 7% live agent request, meaning 93% of those customers are willing to work with a digital voice assistant to get appointments set. Owen says if you’re concern about your customers engaging in the Brooke.ai process, listen to some of the calls you have right now.

44% of calls for serving a vehicle are appointed on average. Brooke.ai will appoint 75% of calls. Beckett says, that Brooke.ai will also follow your dealership policies. It’s getting dealerships to look at how they’re structuring their service scheduling tool.

Owen says to earn the dealer’s trust, he recommends after-hours and overflow. He encourages everyone at the dealership to see what your call failure rate is in service, and that’s where Brooke.ai can fill that gap.

To learn more, visit ProactiveDealerSolutions.com.

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On today’s exclusive CBT News Power Lunch, we’re pleased to welcome Darrel Ferguson, Director of Performance Management at Xtime, a Cox Automotive brand.

Ferguson begins the conversation by discussing why many car dealerships saw a decline in fixed-ops revenue in 2020 and the beginning of 2021. Due to the pandemic, there was a delay in vehicle service. Cox Automotive data reveals that consumers’ concerns about COVID are notably lower. Throughout the pandemic up to now, only 12% of consumers said that they will continue to delay service. Ferguson says this is an opportunity for car dealers to boost their service business because of this pent-up demand.

In order to meet the demand for service from vehicle owners moving forward, dealers need to give their fixed-ops departments a boost. Three key elements, that Ferguson suggests focusing on include increasing convenience, improving transparency, and building trust.

In order to adopt a service-centric model, dealerships should also emphasize digitizing the experience, says Ferguson. Between text communication and digital quotes, it’s about bringing the customer into the experience. 

To increase convenience further, Ferguson says service pickup and delivery have had success. He adds that incorporating these services takes a significant amount of effort on the dealer’s part and is also a big financial commitment. Studies have shown that 89% of consumers find home pickup and delivery very appealing. 51% of customers who use home pickup and delivery are spending more money to take care of their vehicle. It’s about keeping consumers informed and creating a seamless experience. Over 50% of customers would pay $20 for a convenience fee and, 35% to 40% of customers would pay a $40 convenience fee.

Some practices that car dealerships can readily adopt to create a more transparent experience are texting updates, sending videos, and engaging on social platforms. If dealers include a video and photo with a vehicle listing, they have almost a 100% increase in closing.

To find out more, watch the complete interview with Ferguson above.

Did you enjoy this interview with Darrel Ferguson? Please share your thoughts, comments, or questions regarding this topic by submitting a letter to the editor here, or connect with us at newsroom@cbtnews.com.

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